Pay on agenda as MFI owners start review

Gary Favell warned that the turnaround would take years

By Richard Fletcher, Deputy City Editor

12:01AM BST 18 Oct 2006

The new private equity owners of MFI, the troubled retail chain, are to undertake an urgent review of the business. The move could see pay and benefits for shop floor staff cut, a small number of stores closed and production moved overseas in the next 18 months.

MFI shareholders approved the sale of the eponymous retail business to Merchant Equity Partners yesterday. The deal is expected to be completed within days.

The remaining business, Howdens, which sells kitchens to builders and owns a kitchen manufacturing business, is to be renamed Galiform and will remain a quoted company.

Merchant Equity has brought in Gary Favell, the former chief executive of Magnet, to run the business. The current head of retail, Steven Round, is expected to leave next month.

Mr Favell said that the company was a great brand with great potential although he warned that turning the business around would take a number of years and would not "be a walk in the park".

"The current business is not sustainable in its current shape. We will review the whole business," he said.

MFI will offer more contemporary designs and better service. "We are going to be the first to market. We are no longer going to be the follower," he said.

Mr Favell refused to comment on redundancies. "It is too early to say," he said. The review of the business will include staff pay and conditions, and the level of the company's pension contribution.

MFI currently sources the majority of its kitchens from the UK and the retailer has signed an 18-month contract with Galiform for the supply of kitchens.

However in the medium term Mr Favell expects to switch production to suppliers in Italy, eastern Europe and the Far East.